Labor woeful on economic reform, says Argus

By Peter Ker and Ben Schneiders

September 6, 2011 — 12.00am

THE Gillard government has been attacked by one of its most trusted business and taxation advisers, former BHP Billiton and National Australia Bank boss Don Argus, who has accused the ailing government of being lazy on economic reform.

His attack came on the eve of devastating new poll figures for Julia Gillard, with Newspoll showing she trails Kevin Rudd as preferred Labor leader by 24 per cent to 57 per cent.

Don Argus.Credit:Jessica Shapiro

The government has also fallen further behind the Coalition, trailing 41-59 on a two-party basis, while Ms Gillard trails Tony Abbott as preferred prime minister 34-43.

Barely a year after he was appointed by Labor to advise on delivering its mining tax, Mr Argus said there had been too little thought devoted to how to spend the proceeds of the tax.

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In a wide-ranging lament over the state of economic reform, Mr Argus said productivity growth was ''woeful'', industrial relations had gone backwards under Labor and there were grounds for concern over inflexibility in the labour market.

He saved his strongest salvo for Labor's carbon tax, which he said was ''imprudent'' given the fragile state of the economy and the absence of similar action in other nations. He said he accepted the science of climate change but was worried the government was motivated more by politics than science in choosing how to combat emissions growth.

Mr Argus cited the exclusion of carbon capture and storage from the $10 billion clean energy funding package, and said he was ''bemused'' that large sums of money were being dedicated to risky and expensive renewable energy projects instead of gas.

This highlighted how '' politically expedient'' the government's tax reform agenda had been, he said. It had rushed into proposals ''simply designed to navigate the political landscape of the day, and not in the best interests of our country.

''There are similar problems with the [mining tax], where there has not been enough critical evaluation about how the proceeds will be spent. We have a unique opportunity to use these funds for infrastructure that is much needed.''

Mr Argus was hired by the government last year to head an advisory committee on its revised mining tax.

Calling for improvements to productivity, he said private industry should be allowed more access to traditional public sectors like health and education.

With 10 taxes providing almost 90 per cent of government revenue, Mr Argus said Australia needed to simplify its tax regime and should start by reviewing the other 115 taxes.

Australian Industry Group chief executive Heather Ridout also took a swipe at the government, criticising the Fair Work laws and calling for a return to

statutory individual contracts with a test to ensure workers are no worse off if they trade away conditions. She also said the laws were too inflexible, citing restrictions on the use of labour hire and contractors and greater power for unions.

''There is no question that, particularly under the current industrial arrangements, productivity gains are harder to win whether in manufacturing businesses or in other industries.''

Mr Argus echoed her concerns, warning of a return to ''the dark days of the 1970s'' if labour market flexibility was not boosted. He said under the Fair Work laws, unions were resisting ''management attempts to achieve efficiency''.

''Some employers simply have not been able, when faced with industrial campaigns, to hold on to their earlier productivity gains and have reluctantly agreed to go backwards in terms of a loss of the flexibility,'' Mr Argus said.

Growth in labour productivity has been much slower in the past decade after it grew strongly during the 1980s and 1990s. Bureau of Statistics data shows little change in labour productivity growth under the Fair Work Act when compared to the period under WorkChoices, while other measures of productivity have also weakened since 2000.

Trade Minister Craig Emerson rejected the employer calls and said Labor would not bring back Australian Workplace Agreements, the Howard-era statutory individual contracts. ''AWAs were actually used to strip away penalty rates, pay and conditions,'' he told the ABC.

Dr Emerson also questioned some of the talk around productivity. ''Now, when we talk about productivity … what's the proposition: that Australians aren't working enough hours? Or that they're featherbedding? There's too much staff in shops and in factories?''

A spokesman for Treasurer Wayne Swan said the nation had been suffering a decline in productivity since the Howard era, and Labor was trying to reverse the trend. "We can't flick a switch and turn that around,'' he said.

''We know from history that it takes time to see the benefits of the long-term structural improvements we have been investing in. This government has consistently demonstrated its ambitious reform agenda, underpinned by record investments in transport infrastructure, broadband and unprecedented injections in skills and training as seen in the last budget.''

ACTU secretary Jeff Lawrence said what was needed to boost productivity was investments in skills, training, plant and equipment rather than greater flexibility, which was code for ''cutting wages and conditions … This issue of productivity is one which has been falsely put out there as an attack on the Fair Work Act.''

Opposition workplace relations spokesman Eric Abetz welcomed Mrs Ridout's comments and called for a ''comprehensive analysis'' of the laws and for Labor to bring forward a planned review ''urgently''.